More than 3,000 merger and acquisition (M&A) transactions took place in the hospital industry in 2021, a 25 percent increase over 2020, states a report in Fierce Healthcare published on December 14.
Announced and closed deals through the first three quarters of 2021 already exceeded the total volume for all of 2020, and at the current pace, 2021 M&As will easily exceed 2,750 and may reach the 3,000 mark, states the report. Studies show consolidation in the hospital industry leads to higher cost and lower quality, says John C. Goodman, a Senior Fellow at the Independent Institute, president of the Goodman Institute for Public Policy Research, and co-publisher of Health Care News.
“There is no good reason for government policies that encourage this trend,” Goodman said.
Big Hospital Deals
Several megamergers among health systems occurred in 2021, although many of these deals will likely not close until 2022. They include an $11 billion merger between Intermountain Healthcare and SCL Health, a Catholic health system in Broomfield, Colorado.
Health IT and software continue to be the top sectors in M&A activity, exceeding 320 deals and expected to end the year with around 450 deals. The UnitedHealth Group’s $13 billion bid for tech company Change Healthcare has been delayed by the U.S. Department of Justice (DOG) for potential ramifications of the acquisition and it is now expected to close in early 2022.
Other notable deals include Centene Corp.’s $2.2 billion purchase of Magellan Health and a recently proposed deal by private equity firms Bain Capital and Hellman & Friedman to acquire Athenahealth for $17 billion.
Harms Every American
Hospital market consolidation is a problem for every American, says Robert Moffit, a senior fellow specializing in health care and entitlement programs at The Heritage Foundation, in an October Heritage report titled “How Congress Can Help to Reverse Hospital Market Consolidation.”
“The lack of competition in the nation’s hospital markets undermines patient choice and increases consumers’ costs,” writes Moffit.
“Conversely, strong market competition not only increases patient choice and controls costs, but also stimulates innovation in health care delivery and improves the quality of care,” Moffit wrote. “Consumer-driven market competition can deliver what government bureaucracy cannot: fast, efficient, personalized, and patient-centered care. To realize these goals, federal and state officials alike need only remove costly government barriers and adopt pro-competition policies.”
Consumers Need Purchasing Power
The economic distortions in the market created by state and federal health care policies have encouraged the high rate of hospital mergers, says Roger Stark, M.D., a health care policy analyst at Washington Policy Center and policy advisor for The Heartland Institute, which co-publishes Health Care News.
“Despite the best arguments in support of hospital mergers, creating hospital monopolies does not improve patient outcomes, nor does it decrease health care costs,” said Stark.
“The government has offered no relief to consumers when it comes to this monopolistic practice,” said Stark. “Therefore, only patients, as consumers of health care, can force competition onto the marketplace, prevent monopolies, and improve the quality of health care while controlling prices.”
Roll-back Bad Policies
Significant steps are needed to reverse the trend toward hospital consolidation and promote competition in the nation’s health care markets, states the Heritage report.
First, Congress could encourage state officials to review, reform, or repeal certificate of need laws because they act as barriers to competition, protect the financial interests of existing hospitals and medical facilities, and neither control costs nor improve the quality of care.
Another option would be to adjust federal health care grants, payments, or subsidies to the states and provide some relief to federal taxpayers who are currently funding the additional costs imposed on them by these state-generated anti-competitive laws and regulations.
Also, Medicare should include site neutrality it pays claims. Whether a medical service is delivered in a physician’s office, a clinic, or a hospital setting, the Medicare payment for that service should be the same.
Finally, the report recommends repealing Obamacare restrictions on Medicare payment to physician-owned hospitals and specialty hospitals. The current restrictions do little more than serving the special interests of large hospital systems and undercut consumer choice of high-quality, specialty care.
Kenneth Artz (KApublishing@gmx.com) writes from Dallas, Texas.
Robert Moffit, “How Congress Can Help to Reverse Hospital Market Consolidation,” The Heritage Foundation, Oct. 5, 2021: https://www.heritage.org/health-care-reform/report/how-congress-can-help-reverse-hospital-market-consolidation